This has been rumoured for over a year now.  What can they realistically do though.  The PSP is pretty small anyway...I reckon it must be with a much better battery that gives double the time.  They can't install an extra analogue as what happens to gamers with only one....I reckon it's a waste of time unless they can build them much cheaper with different materials.

Personally, I don't think it's needed. 

I can't see them making the PSP any smaller, most of the space is taken up by the screen, and if you made the control area much smaller then it would be uncomfortable to hold. Although what they could do is make it a clamshell design, with the controls down the bottom and the screen up the top, that would allow for them to make the package smaller as well as protect the big old lovely screen from scratches. While they're at it, they could add a second screen, a stylus, a microphone...

Now that Nintendo DS Lite placed a irreversible advantage, does not advance nothing more… Must have done this behind the 1/1,5 years. The DS Lite already became TOP OF MIND in consumers.

I just sold my PSP and it's games, but I told myself I would re-purchase one for future games if they brought out a new model, so that is damn good news to me.

I enjoyed PSP but sold mine to get some DS games in my recent financially constrained times.

This is my mind is the only way Sony has a chance to close the gap between it and the DS, or more accurately it's the only way the gap between the DS and PSP doesn't keep growing at a faster and faster rate. Make a smaller lighter system with a 20-30% smaller screen, better batter life, and make it available in different colors, and the system might look relevent in the market again against the DS Lite.

with all the competitiveness between the 2(sony/N) i wonder when or if the rumors of Microsofts portable will ever solidify??

I think one of the biggest draws of the PSP is its screen. If you make it smaller, that would be a huge minus, in my opinion. I think they should add another analog nub, and have an internal flash drive. And cheaper (150).

Things they can realisitcally do that wouldn't affect backwards compatibility with new games and old PSP's: - Better battery - Brighter screen - Clamshell design - Built in flash memory - Faster UMD drive Things like adding a second nub or a touch screen aren't going to happen 'cause then either old PSP owners wouldn't be able to play new games using these features or devs would have to make games for both versions of the system, which would just end up with having the new features be unsupported anyway.

I don't think that they should be concerned with a PSP lite, they should be working on a PSP 2. This is what they need to do with it:

2nd Analogue stick

(I don't know if this is possible) make popping out analogue sticks so they are sticks not nubs

Internal flash drive

(Blu-ray?)UMD drive (but faster)

Longer battery life

Bluetooth

I think that they should make two designs. Firstly, the PSP2, one that is roughly the same size as the current PSP (maybe a bit thinner), and with hard drive of around 2GB, for $150, without wi-fi

then the second model, the PS2P should either be a clamshell or a slide thing (like the Vaio UMPC) with a keypad on the lower level with they controls. This version should contain a 40GB hard drive, and Wi-fi and a phone (no sim card included), it would be thicker than a DS. This one would cost around $250

Honestly what they should do even separately from the PSP is create a similar design, two analog nubs/sticks and two sets of shoulders, a little taller and with a full DVD drive instead of UMD's, then have it play PS2 games.